Home News Mortgage borrowers could save thousands with higher credit scores: Zillow analysis

Mortgage borrowers could save thousands with higher credit scores: Zillow analysis

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According to Zillow, mortgage borrowers can reap big savings by taking this important step before buying a home. (iStock)

Savings on a mortgage can be difficult in a high interest rate environment, but one thing borrowers can do to reduce their monthly mortgage payments is to improve their credit score.

Recent Giraud analysis A borrower with a “good” credit score (between 760 and 850) can save up to $103,626 in mortgage interest payments over the term of a 30-year fixed rate loan. This is based on the current price of a typical home of $354,165. A buyer with a “fair” credit score between 580 and 669 could be paying up to $288 more in monthly mortgage payments than a buyer with “excellent” credit.

“When you’re thinking about buying a home, the best first step you can take is to fully understand your financial situation, what you can afford, and your outstanding debts and obligations,” says Zillow Home. said Libby Cooper, Vice President of Loans.

She said some steps borrowers with poor credit can take to improve their scores include contesting possible reporting errors and paying off as much debt as possible. This could help borrowers get more eligible mortgages, potentially saving them hundreds of dollars in monthly mortgage payments.

If you think you’re ready to consider a mortgage, consider using the Credible Marketplace to easily compare interest rates from multiple lenders in minutes.

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Equifax sent wrong credit score to lender

Zillow’s analysis highlights just how much a reporting mistake by one of the three major credit bureaus can cost borrowers. Equifax recently revealed that it sends wrong credit scores to lenders, which can affect borrowers’ interest rates and cause their loan applications to be declined.

According to Equifax, as many as 300,000 people have experienced a score change of 25 points or more, enough to change a borrower’s credit rating from good to fair or from fair to poor. However, the lender typically draws scores from all three credit bureaus when underwriting a mortgage.

Fannie Mae and Freddie Mac may have purchased only a small amount of loans that were affected by incorrect credit scoring., according to wall street journalMortgage lenders who may have purchased a loan at a higher interest rate before the mistake was made will end up with Government Assistance Agency (GSE) money. Conversely, GSEs must reimburse lenders for fees on loans underwritten with lower scores.

If you want to take advantage of current mortgage rates, you can consider refinancing your loan to reduce your monthly payments. Visit Credible to see individual interest rates without affecting your credit score.

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High interest rates could mean borrowers are locked up longer

Zillow said the current high interest rate environment will only exacerbate the situation for borrowers with low credit scores as they have little room to refinance at higher rates even if their credit scores improve. This could leave many borrowers stuck for longer than before at the high cost of poor credit quality.

We serve homebuyers nationwide record home prices, adding to the affordability issue. Home prices rose 15.8% annually in July, according to the . core logicMeanwhile, borrowing rates have nearly doubled since last year when interest rates were below 3%. Freddie Mac DataMortgage rates have fluctuated this year, but are currently hovering around 6%.

One of the bright spots in rising house prices is that Americans have accumulated wealth. record amount of stock at their home. Nearly half of all mortgage payers have stocks in abundance, according to data reported by. atomreal estate data curator.

Rick Sharga, ATTOM’s executive vice president of market intelligence, said the continued rise in home prices was followed by “a high percentage of equity-rich homes we’ve seen, and a severe underfunding.” Lowest loan percentage.”

Sharga noted that homeowners are likely to continue amassing record amounts of wealth for the rest of 2022, even if house price gains begin to slow.

If you want to take advantage of rising house prices, you can consider refinancing cash out to pay off debt or fund home improvement projects. Visit Credible to see individual interest rates without affecting your credit score.

Have a financial question and don’t know who to ask? Email a Credible Money Expert [email protected] Your question may be answered in Credible’s Money Expert column.

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